Govt plans to impose cess on natural gas

June 02, 2009 16:43 IST

The government is mulling levy of small cess on natural gas to fund construction of national gas highway network even as it plans to extend LPG reach to rural areas and launch smart cards for kerosene.

Petroleum minister Murli Deora discussed the idea of levy of $0.20 per million British thermal unit as cess on natural gas to mop up Rs 3,000 crore (Rs 30 billion) annually for laying down the gas pipeline network with CEOs of state-run firms.

The brainstorming session called to chalk out the 100-day plan for the new government also decided on launching a new Scheme of Rural LPG Distributor (Gramin LPG Vitrak), petroleum secretary R S Pandey said.

At present, LPG distributorship are being set up in towns and villages having a population of 5,000 and the potential of 2,500 refills per month. The Gramin Vitrak scheme would be launched at locations having potential of up to 1,000 refills per month.

About 1,000 rural LPG distributorships would be set up. Pandey said the government will also launch a Smart Card scheme for kerosene on pilot basis in cities like Pune, Bangalore and Hyderabad.

The smart cards would be for distribution of subsidised kerosene to only intended beneficiaries and check its diversion. Sources said natural gas has fueled economic growth the world over and in India it transformed regions through which the nation's first cross-country Hazira-Vijaipur-Jagdishpur pipeline passed.

But there is no infrastructure to transport gas to southern and eastern regions. Even the northern region is not completely covered. There is an urgent need for a national gas highway on the lines of national highways, they said.

India produces 105 million cubic metres per day of gas from fields lying in western and eastern offshore. Besides, another 25 mmcmd is imported in form of LNG at terminals in Gujarat.

Most of the domestic and imported gas is consumed in Gujarat and along the HVJ.

For equitable economic development, there is a need for a criss-crossing National Gas Highway, Pandey said.

A nominal 20 cents ($0.20) per million British thermal unit cess on domestically produced natural gas may be levied to garner Rs 3,000 crore annually that can help build 500-600 km of gas pipeline, sources said.

The government had previously imposed Rs 2 a litre cess on petrol and diesel to fund the ambitious National Highway Development Project. It also levies Rs 2,500 per tonne cess on domestically produced crude oil to meet developmental needs of the energy sector.